0:00

Thinking about selling your business. Do you know what is

0:02

the difference between selling your business at a good time

0:04

and a bad time? It could be the difference between

0:06

five times multiple, right? Meaning you could have sold it

0:08

at a bad time for five million because you have

0:11

so much pressures. Four years later, $28 million. Three years

0:13

later, $101 million. You

0:16

know how I know this? Because I went through it

0:19

when my business I could have sold for $10 million

0:21

because the stress was so bad. And I said five

0:23

more years. Then it's $50 million. And then I get

0:25

an offer for $120. I said

0:27

three more years. Then the number was

0:30

beautiful. When it closed and the money hits

0:32

the bank, it's life changing. But today, I'm going

0:34

to talk to you about 10 worst

0:36

times to sell your business. If

0:40

you've already added this video, give it a thumbs up and subscribe

0:42

to the channel. So let's get right into it. Today, I'm having

0:44

a call with a guy that runs a transportation company with his

0:46

father. These guys used to do $60 million

0:48

a year in 2022. He takes over. The

0:50

business is at $20 million a year right

0:53

now. If you're in the logistics business, you

0:55

know how frustrating it is. A truck was

0:57

worth $150,000. Today,

0:59

they're selling it for $50,000. And trucks are

1:01

parked not going up because orders are not what they used

1:03

to be in 2022. So this guy's

1:05

sitting there saying, well, maybe do I sell the business? Do I

1:08

not sell the business? The stress is up to here. In fighting,

1:10

all these things that are going on, and

1:12

we had a lot of different conversations. So

1:14

number one rule, when it comes up to

1:16

selling your business, never sell your business in

1:18

a down year. When your business is not

1:20

doing well, the first thing you want to

1:22

think about is I got to get out

1:24

of this. Because you got three F's. Fight,

1:27

flight, freeze. Some frees don't want

1:29

to go to work, are afraid to make

1:31

the phone calls. They don't call the clients

1:34

back because they're worried they're going to cancel.

1:36

You're freezing. It's not a leader and that's

1:38

not you. You can't do freeze. Some want

1:40

to fight. I'm leaving the industry. I'm so stressed

1:42

out. I'll never forget 2010, 2011. I'm laying in bed

1:44

thinking to myself, all

1:48

my savings has depleted to $13,000. I have

1:50

so much stress, anxiety, panic, and I don't

1:53

know who to explain it to. You don't

1:55

have like a therapist you go to, right?

1:57

It's not like you're talking to somebody. Everybody

1:59

is following. your dream division you sold one

2:01

day we're going to be dot dot dot. I'm

2:03

saying Mike did you make the right decision? How

2:05

much can you get for the business right now?

2:07

If somebody gave me two and a half million

2:09

dollars watch this. A guy comes to me we

2:12

meet at Beverly Hills Hotel. He knows who he

2:14

is if you watch as this hill crack up.

2:16

We're in the hotel. He says to me if

2:18

you partner with me I'll get

2:20

you three million dollars of which

2:22

you can take one and a half million dollars

2:24

off the table. I go in the room and

2:26

I'm sitting thinking to myself after having put ten

2:29

eleven years into this business I'm gonna sell this

2:31

business and give a fifty percent for one and

2:33

a half million dollar check. I walked away I

2:35

said how big you think my vision is? That

2:37

offer frustrated me and upset me. I came back

2:39

and grew the business obviously we sold for a

2:42

lot more than that. What's the point there? But

2:44

at the down year when things weren't going my

2:46

way I almost made an emotional decision you cannot

2:48

be doing that. So fight, flight,

2:51

freeze. You got to fight and

2:53

figure out a way to come out of it. That's what

2:55

you got to be doing. Number two. Next one. You haven't

2:57

done enough research to find out what you can do to

2:59

increase the market value of your business. I remember it is

3:01

2017 we have

3:03

a board meeting one of my board members I say

3:05

hey I want to go sit down with JP Morgan

3:08

Chase and all these other guys because I want to

3:10

know my company's worth. A guy says your company's worth

3:12

nothing with the small Ibadah that you have. We're at

3:14

this restaurant called Ocean Air. There's seven people there those

3:16

seven know exactly which meeting I'm talking about. It gets

3:19

very heated. I asked this guy to leave the board

3:21

I said how dare you sit in this room here

3:23

if you don't believe in it. I make

3:25

the call I call the guy that gave the money

3:27

I told him this guy's got to leave. They didn't

3:29

invite him back to the meetings that we were doing

3:31

but I said I want to go to New York

3:33

and sit down with private equity and investment bankers. We

3:35

go. I sit down with companies that were selling businesses

3:37

for 25 to 50 million dollars. I went to companies

3:40

that were selling companies for 50 to 200 million dollars

3:42

and I sat with two investment bankers that would sell

3:44

businesses from 200 million to a couple billion dollars. These

3:46

guys were the big guys. So obviously these guys kind

3:48

of talked to me like this because we were not

3:50

big yet. These guys were kind of like you're gonna

3:52

get there eventually and these guys were fully like oh

3:54

my god we want your business because we could sell

3:56

it right now for 38 million dollars or 50 million dollars

3:58

and I don't want these guys. I want these

4:00

guys. So I said, so tell me, what

4:02

is the market right now paying for? Who are

4:04

the biggest buyers right now? Is it strategic buyers?

4:06

Every one of these guys, I did so much

4:08

research and I'm taking those, taking those, taking those,

4:10

taking those, taking those. They said, for company your

4:12

size, they're given five to seven times eBITDA. I

4:14

said, five to seven times eBITDA? Yes. I'm not

4:16

doing that. Well, you know, just that's what it

4:18

is for the market right now. Whatever you do

4:20

is five to seven. I said, who was sold

4:22

recently for 15 to 20 times? The only people

4:25

selling for 15 to 20 times eBITDA are the

4:27

tech enabled companies. Can you give me some examples?

4:30

What did they buy? What were they special about

4:32

their software? The person that bought it, what did they

4:34

do with the software? They use the software for this.

4:36

Really? Yes. Let's come back. We take the 10 million

4:38

dollars that we had raised. We took 3 million of

4:41

it. We invested into our software bamboo. That software

4:43

eventually we put five to 10 million dollars into

4:45

it and it took our company from being five

4:47

times eBITDA to 15 plus

4:49

times eBITDA. Why? Because we

4:51

went and did research to

4:53

find out what we could

4:55

do to increase the valuation

4:57

of the company and the

4:59

multiples. That takes you going

5:01

to industry conferences and interviewing with investment

5:03

bankers to see what tips and what feedback

5:05

can give you of the last 20 sales

5:08

that are being done, who the buyers are,

5:10

what they're paying for, why the valuation, and

5:12

then from there say, I think we can

5:14

do this to increase the valuation of our

5:16

business. So don't sell until you do your

5:18

research. Number three, interest rate matter. But this

5:20

also has to do with market. For example,

5:22

if you sell your company at high interest

5:25

rates, okay, where the climate is money is

5:27

expensive, you're not going to get

5:29

the highest valuation for your business. Like today,

5:31

a commercial real estate property that was a

5:33

hundred million dollars, it's selling for 35 million

5:35

dollars. Why? Rates are so high. So I'm

5:37

not even wanting to do this. I'll deploy

5:39

and I'll get rid of it, right? So

5:41

when rates are low, we sold at

5:43

a time where there's a part of it

5:46

that's lucky. It was the last month of

5:48

cheap money that was available. So when money

5:50

is cheap, a lot of these aggregators or

5:52

bigger companies are able to get

5:54

a billion, half a billion, a couple billion dollars

5:57

of money to go and pick up different companies.

5:59

Let's just say if they're picking them up, strategic

6:02

or a regular investor that's coming in to buy a

6:04

PE, whatever it may be, right? So if you sell

6:07

at a low interest rate, you'll typically get a

6:09

better valuation than if you sell at a high

6:11

interest rate. So you have to watch the market,

6:13

you have to see what the market is doing.

6:15

Like right now, if you look at 2023 IPO

6:17

year, it was one of worst years in IPO,

6:19

not a good year for IPO. But probably 24th,

6:21

4th quarter, maybe 2025 IPO is going to come

6:24

back up. So there is also elements of when

6:26

you go public, when you sell, when you go

6:28

through those things, it could be the difference between

6:30

you selling for 50 million and 100 million, depending

6:32

on what size business, it could be 100 million

6:34

or $300 million because interest rates and a

6:38

market favors you. Point four, you haven't hired a consulting

6:40

firm to see what feedback they can give you before

6:42

going into the market. So you go hire a consulting

6:44

firm and you sit down with them, you say, look,

6:46

here's what I'm thinking about doing. This is my business.

6:49

Here's what I got going on. Can you from the outside

6:51

look at my business and see what areas of weakness I

6:53

got to be able to increase my market value. So I'm

6:55

ready to go out there and sell. So somebody will sit

6:57

down, they'll look at your org chart, they'll look at your

6:59

management team, they'll look at your numbers, they'll

7:01

look at your technology that you have, they'll look at

7:03

the markets you're in, they'll look at your story being

7:05

told. They'll look at all of that stuff, then they'll

7:07

help you put a pitch deck together. And the pitch deck

7:09

has to be a proper kind of pitch deck put together

7:12

before you go onto the market. Those

7:14

things where somebody says to myself, I'm not, why would I spend $100,000

7:16

or $200,000 to

7:18

go with this consulting firm and do this engagement? Why would

7:20

I spend that kind of money? Because

7:23

if you spend a couple hundred thousand dollars

7:25

with a consulting firm and you

7:27

end up getting a bigger valuation for your business because

7:29

you were able to get cleaned up within 3,

7:31

6, 9 months, what is that worth to you

7:33

if you sell the business for $48 million instead

7:36

of $32 million? You're worried about $200,000, they made

7:38

you $60 million additional dollars. So for you, if

7:40

you're somebody that's thinking about selling your company, you

7:42

want to learn more before you go into the

7:45

marketplace, we run a company called Bed David Consulting.

7:47

You can go to our website, beddavidconsulting.com, watch the

7:49

two minute video at the top how we differentiate

7:51

ourselves from the marketplace, then go watch the five

7:53

by five approach that we take. You

7:56

can fill out the information, watch the 22 minute video. If there's

7:58

a way we can help you out, one One of our

8:00

reps will get ahold of you, you'll have a conversation,

8:02

and we'll see what we can do together. But if

8:04

it's not us, hire somebody. On the

8:06

consulting side, there's many great ones out there. Hire

8:09

somebody, sit down with them, see if there's a

8:11

way that can help you increase your market value

8:13

before you go out and sell your business. Number

8:16

five, disorganize financial records. Why?

8:19

Because typically, businesses use a relative or a

8:21

cousin or somebody's brother, sister, it's like, well,

8:24

I went to school with this person, and

8:26

that guy's my accountant, and they're independent accountants,

8:28

not working at a big accounting firm. I

8:30

remember when I had to fire my accountant,

8:33

nice guy, funny guy, overwhelmed, and every time

8:35

I needed something, next month, next month, next

8:37

month, I can't afford to do that. So I

8:39

went and hired a top 10, we worked with

8:41

them. They made everything clear. So when I was

8:43

going to raise money, the people I was talking

8:45

to were like, wait a minute, you've been doing

8:47

accounting like this? Yes.

8:50

Wow. You guys are just put together? Yes.

8:53

Interesting. Great. Can

8:55

we see your numbers? No problem. And then they

8:57

would talk, and the accountant said, we spent three

8:59

times probably more money on our accounting fees, maybe

9:02

five times more money, but when it came down

9:04

to raising money, the investors were

9:06

blown away with the fact that we were

9:08

prepared. So take an audit and inventory about

9:10

who manages your finances, your accountants. If it's

9:12

not the ones that are ready for the

9:15

next level, especially when you want to go

9:17

sell, upgrade the accounting firm you're currently working

9:19

with. Next one, running a business

9:21

is hard. So number six, a lot of people

9:23

want to sell their business, but they're burned out.

9:25

This is the worst time to sell your business.

9:27

Burned out means what? You're working so hard, things

9:29

are not going your way. You hired seven people,

9:31

they all quit. You can't land a C-suite executive

9:34

that stays with you. It's just so many different

9:36

frustrating things that's going on. You're using a recruiting

9:38

firm that they're not giving you the best people.

9:40

It's just so many different things. So eventually you're

9:42

coming home, you're like so stressed out, you're like,

9:44

I'm done. I don't want to deal with this

9:46

anymore. Probably one of the

9:48

worst times to sell when you're burned out because you're

9:50

not ever going to be permanently burned out. Instead use

9:53

that moment to say, what do I need to do

9:55

to improve as a leader? What courses do I need

9:57

to take? Do I need to go take an executive?

9:59

of course, you become a better operator, better CEO,

10:02

maybe I'm not good at a sales person, maybe

10:04

I need to study conflict resolution because I don't

10:06

know how to communicate with them, but be straight

10:08

up with yourself. If you have a person that's

10:11

a coach of yours, they'll probably be able to

10:13

give you feedback and say, consider working in this

10:15

following area, but when you're having one of those

10:17

years, when you're burned out, immediately hire yourself a

10:20

coach, recreate yourself, improve yourself, because odds are everything

10:22

rises and falls on you. Number seven, after losing

10:24

a partner, so let's just say you guys had

10:26

a 50-50 deal, you're running the company, things are

10:29

going great, he walks

10:31

away, she walks away, you're by yourself, you're like,

10:33

oh my God, that guy was our finance guy,

10:35

he was our tech guy, he was the CTO,

10:37

he was a salesperson, what am I gonna do

10:39

now? I better go out there

10:42

and sell, and you kind of are panicking

10:44

because the pressure is now all on you,

10:46

right? The pillow officially got harder. Used to

10:48

be softer because you could lean on somebody.

10:50

What do you do now? Many people have

10:52

gone through what you've gone through, it happens

10:54

in business, people may have different life-changing events

10:56

that's taking place that causes them to want

10:58

to step away, this could be an opportunity

11:00

for you to go as a leader and sit there and say,

11:02

I need to go find, recruit better people. And

11:04

on that part, you need to maybe get better

11:06

at attracting people, retaining them, recruiting them, engaging with

11:08

them, there's a lot of different things, I even

11:10

made a video on this, that I'll put the

11:12

link here if you do wanna find out a

11:14

way on how to get better in this specific

11:16

recruiting, hiring and retaining aspect that causes a lot

11:18

of stress, this will be a good video for

11:20

you, but before selling your business

11:22

because you lost a partner, take a step

11:24

back, put, reorganize everything, and then six months

11:26

later, things are gonna be okay for you.

11:28

Number eight, AI is disrupting your industry and

11:31

you're panicking, what do I do? I'm

11:33

not needed, what if this, what if

11:35

that? Well, that typically happens with AI

11:38

when the operator, the founder, the CEO is

11:40

not proactive to go to conferences to see

11:42

what others are doing. In our industry, there's

11:44

a lot of FinTech conferences to go to,

11:47

whatever industry you're a part of, there's probably

11:49

a lot of conferences to go to that

11:51

talks about tech, how is tech disrupting your

11:53

industry, how is AI disrupting your industry, how

11:55

are some people using AI to leverage and

11:58

accelerate growth, what are they doing? not

12:00

doing the proper research and finding out what's going

12:02

on, you're going to be left behind. There was

12:04

four guys that I dealt with who

12:06

were super, super knowledgeable about the insurance industry. Every

12:09

90 days, I would call these four guys. You

12:11

know what I would ask him? Hey, let's call

12:13

him Johnny. Hey Johnny, so what's going on? How

12:15

you doing? Everything good? Yeah, so what's the latest

12:17

with the insurance industry? Anything I need to know

12:19

about? Yeah, you do. They're just new company that

12:21

came out with the software. What is it about?

12:23

Pa, pa, pa. Wow. Okay. That one company, yeah,

12:25

what about it? They're about to go away with

12:27

those two products. Really? What caused them? Because of

12:29

such and such. Anybody else who's going to follow

12:31

their lead, we're concerned that these other two companies

12:34

may. Whoa, one of them is the one I

12:36

write. Great. Let me go do a little

12:38

bit more research. What's going on with those guys? So

12:40

you need to be involved with some of those influencers

12:42

so you can kind of get some insight on what's

12:44

going on in your industry. Nine could be you're going

12:46

through a personal crisis. This could be a divorce. This

12:48

could be marriage is not working out. And that's very

12:50

hard. I'm not going to sit here and tell you

12:52

it's easy. I've seen it. It's not easy. I always

12:54

said marriage is the hardest thing you'll ever do, especially

12:56

if you're an operator and doing that. You've got kids,

12:58

you've got all things going on. When you're going through

13:00

that process, if it's something that's tied to the nuptial

13:03

and all that stuff in divorce, I mean,

13:05

you've got to follow the laws of whatever they

13:07

may be. If it's not, sometimes things are very

13:09

hard on your personal life. You know, you see

13:11

athletes, sometimes they go through a lot of different

13:13

things that they go through. How

13:15

do you handle those? How do you manage those?

13:17

You learn a lot about yourself when you go

13:20

through those seasons. Unfortunately, it's not easy. And you're

13:22

sitting there worrying about, well, what are people going

13:24

to think about me? How am I going to

13:26

handle my kids? My parents are calling me, my

13:28

friends. I used to really be friends close with

13:30

these guys, but they're taking her side or they're

13:32

taking his side. This kind of sucks. What do

13:34

I, all these things are part

13:36

of it, but it lasts three to six

13:38

months. You know why? Because everybody's dealing with

13:40

their own set of drama. They don't know

13:42

about everyone's dealing with something. Everybody is. They

13:44

just don't tell you about it.

13:46

Everybody is going through something

13:49

right now, but they're very good actors.

13:52

We don't shoot. You're playing poker right

13:54

now. You know it. So is the rest of

13:56

the world. A part of your job when you're

13:59

going through that. Take a deep breath,

14:01

reflect, have the right people

14:03

around you, the right advisors, the right mentors to

14:06

kind of help you throughout that process. I'm sure

14:08

you got your right friends and people loved ones

14:10

that will help you go through it as well.

14:12

But meanwhile, you chose to start a company. Nobody told you to

14:15

do it. You didn't have to start a company. Why

14:17

don't you just go be a barista at Starbucks? Why

14:20

don't you go work at a regular place? Who told you

14:22

to work this? Go work at a movie theater and check

14:24

tickets. You don't have to start a business. That was your

14:26

choice. Now you got to get the job done to finish

14:28

it up and you're not there yet. So when that happens

14:30

and it's a personal crisis, you still got to take the

14:32

lead. Not telling you to be a robot. There's going to

14:34

be moments you have to step away and go enjoy, you

14:36

know, go have your moment to reflect. But at the end

14:38

of the day, if you're a leader, you got to go

14:40

through that season as well. Last but not least, you only

14:42

have one buyer. Never sell when

14:44

you only have one buyer. I've been through that

14:46

before. When you have one buyer, here's what you

14:48

do. I personally can tell you I did that.

14:50

You call the buyer like, hey, so we're getting a

14:52

lot of other offers. Yeah, we're probably not going to

14:55

respond for another month or maybe two months. But

14:57

yeah, if you do, great congratulations to

14:59

you. If you see something

15:02

that's a better offer, all the best to you.

15:04

You're like, no, no, no. You know,

15:06

we're willing to. They know that

15:08

you don't have another offer. So they can go

15:10

lower and lower and lower. Makes sense. So what are

15:13

you doing in a situation like that? Maybe you have

15:15

to regroup and take your company off the market and

15:17

say, yeah, I'm not selling. That's what we did. But

15:20

yeah, we're not selling. Second

15:22

time around when we went through it, nearly 17 offers.

15:25

You know what happens when you get 17 offers? And

15:27

your investment banker calls and says, hey, this is all

15:30

I'll tell you. You got 24 hours. If

15:33

you don't make an offer, we're putting you out of the

15:35

deal. No, no, no, no, no. I'll get you

15:37

an offer tonight. Okay, cool. I'm telling

15:39

you. Tomorrow, you're out. No, I'll

15:41

get you the deal. No problem. And

15:44

when will you close? So you see, now you

15:46

have leverage, right? So if you only have

15:48

one offer on the table and you sell, they own

15:50

you, they control you. If they fall for the

15:52

trap that they think you have multiple options, well, then good

15:54

for you. But for the

15:57

most part, buyers know when you're bluffing, especially

15:59

when you're dealing a big amount of money that

16:01

you're about to sell that's life-changing for you when you've never

16:03

made this kind of money before. You're going to act in

16:05

a different way and they're going to know it. If you

16:07

got value out of this video, give it a thumbs up

16:09

and subscribe to the channel. And if you're watching this and

16:11

saying, man, I got a question for Pat, I

16:13

specifically want to ask you a question, no problem. Download

16:16

the App Manect. You get to pay to

16:18

ask any questions from experts, consultants on the

16:20

App Manect. If you want to ask me

16:22

a question, I can text you back or

16:24

respond back in an audio or I can

16:26

respond back in a video. Before you can

16:28

connect with Tom, if you know Tom, you've seen him

16:31

on the podcast with me, Biz Doc. He's

16:33

been involved in doing nearly 20-something deals, selling

16:36

or raising money for close to $2 billion. If

16:39

you want to ask Tom any questions in this area as

16:41

well, he's an expert in this area. Having said that, take

16:43

care, everybody. Bye-bye.